Foreclosure Nation

Mortgaging the American Dream

Shari B. Olefson, JD, LLM

Statistical Indicators

U.S. Housing Prices Fell Again in January

Posted on Monday, April 4, 2011

The housing market remains mired in trouble, with plummeting prices and slumping sales. First-time buyers are fleeing, sellers are frustrated, builders are depressed and lenders are skittish about making new loans. “The numbers are gloomy, no question,” said the economist Karl E. Case. “We’re bouncing along a rocky bottom.” And that, he said, is the optimistic view. “Others think we’re falling off another cliff,” Mr. Case said. Housing prices slid in January for the sixth consecutive month, putting them barely above the lows reached in the depths of the recession two years ago, according to the index that Mr. Case helped develop. The Standard & Poor’s Case-Shiller Home Price Index for 20 large cities declined 1 percent from December, putting the slide from its 2006 peak at 31.8 percent, according to data released Tuesday. Eleven cities hit a new low for the downturn, including Charlotte, N.C., Miami, Tampa, Fla., and New York. Prices in New York have fallen 23 percent from their peak. Analysts expected a rough winter, but not quite so brutal. “We are more negative on housing than we were three months ago,” said Jennifer Lee, a senior economist at BMO Capital Markets. Any recovery will be delayed from this fall until next year, she said. Buying a house is a mix of faith and necessity, but that first element is scarce these days. The Conference Board reported Tuesday that its consumer confidence index tumbled 8.6 percent in March, the first drop in six months and the largest in a year. Only 15 percent of respondents thought their incomes would increase over the next six months. Among the troubles facing the market is a pervasive sense that houses are a bad bet. If prices still have further to fall, if loans are tough to get, if interest rates are no longer plunging, why not put off a deal if you possibly can? Yet as Mr. Case suggested, things could be worse. The market is not falling at nearly the rate it was in 2008. All but the gloomiest analysts think the market is much closer to the end of the process than the beginning. An element that is paradoxically working to shore up the market is the millions of foreclosed houses that are not coming back for sale and contributing to the abundance of inventory. Too much inventory pushes down prices. Lenders, who are wrangling with policy makers over reforms, placed 21 percent fewer homeowners in foreclosure in January than they did in November, even as the number of loans in severe default was holding steady, according to data released Tuesday by LPS Applied Analytics. One reason for fewer foreclosures is that more struggling borrowers appear to be making deals with their banks. The percent of severely delinquent loans returning to paid-up status rose to 22 percent from 10 percent over the last year, LPS said. For many of the rest, foreclosure is less a process than a destination, the data indicates. Three out of 10 homeowners in foreclosure have not made any payment in at least two years. Case-Shiller is a three-month moving average, which means it is resistant to quick changes. On a seasonally adjusted basis, January’s drop was 0.2 percent, the same as in December. In the slower winter months, the adjusted numbers are considered less indicative of the market’s true condition. Prices were down 3.1 percent from their levels a year earlier. Only two of the 20 cities in the index recorded price increases during that time: Washington and, barely, San Diego. First-time buyers, a critical force in the market, have become scarcer since a stimulus program involving tax credits came to an end last spring. “That really motivated a lot of people to act,” said Steven Thoele, a broker with Keller Williams Realty in Portland, Ore. “Eight grand in your pocket went a long way to making the numbers work.” Portland reached another low for the current downturn in January. Prices there fell 1.8 percent from December. They are now down 27 percent from their 2007 peak. “You do kind of wonder where the bottom is,” said Mr. Thoele. “Sellers know in the back of their mind that their home is worth less than at the peak, but they’re still a little surprised when you tell them their $400,000 house is now worth $300,000.” Atlanta, Cleveland, Detroit and Las Vegas are now below their average prices of 11 years ago, and Phoenix is nearly there. Charlotte, Chicago, Dallas and Minneapolis are not doing much better. After adjusting for inflation, the struggles in these cities are even more pronounced. The Case-Shiller release capped a run of weak housing reports. Existing-home sales were down in February by nearly 10 percent from January, the National Association of Realtors reported last week, much worse than expected. New-home sales in February were 14 percent below forecasts, according to the Census Bureau. At an annual rate of 250,000, sales were the lowest since the advent of comprehensive record-keeping in 1963. In one hopeful note, the National Association of Realtors said this week that pending home sales rose 2.1 percent in February. Those deals, which will become final in March and April, indicate that sales are unlikely to continue to tumble, which could help stabilize prices. “The spring market could have some good surprises,” said Mr. Case, the economist. “I say that with absolutely no conviction.” By DAVID STREITFELD, THE NEW YORK TIMES